Lucky Charms

May 26, 2010byRob Bates

Baubles, bangles, and beads are giving retailers a recession-era boost. How long can they bank on the colorful trend?

For years, the industry glumly watched other industries generate buzz and excitement with shiny new gadgets and gizmos. Would people ever get worked up over jewelry the way they did over the iPad? As it turns out, yes. Just ask the sometimes-giddy retailers carrying Pandora. “You should see the lines in the store,” says Miguel Gonzalez of Florida’s Miami Lakes Jewelers. “We’ve had to put in a number system—like a deli.” Says Trey Bailey of Bailey’s Jewelers in Rocky Hill, N.C.: “It’s a phenomenon. We have people coming in our store 15 times a year. For a jeweler, that’s unheard of.”

Beads and charms have become a huge success story at a time when the jewelry biz has hardly been bursting with good news. Over the past few years, business has steadily doubled for both Pandora and its rival Chamilia. Notes industry consultant Michael O’Hara of Consensus Advisors, “Without Pandora and Chamilia, a lot of independents would be out of business.”

Loose bead by Chamilia

The current bead craze dates back only to 2003, when Danish émigré Michael Lund brought Pandora to the United States. Lund had already established a Scandinavian furniture brand here and figured he’d try with Pandora, which had been successful back home. The early days were tough. “Jewelry stores looked at me like I was insane,” Lund recalls. “Why spend an hour selling a $40 bracelet?”

So the company targeted gift and clothing stores—and saw immediate results. “We sent a starter kit to one store on a Friday,” Lund recalls. “By Monday, they were sold out. That’s when we realized we had something.”

Loose bead by Chamilia

From there, Pandora used a combination of trade advertising and buying groups to ingrain itself in jewelers’ minds. And while many were initially reluctant to carry such a low-end item—bracelets (in leather, silver, and gold) range from $30 to $1,170, charms (in Murano glass and in silver and gold, studded with diamonds and semiprecious stones) for $25 to $735—today no one disputes its value as a traffic builder. “We’ve been here 23 years, and some people didn’t know we existed until we got this product,” says Gonzalez.

Loose bead by Chamilia

“Many people are intimidated coming into a jeweler,” says Robert Smith, whose Chillicothe, Ohio, store, E.M. Smith, features a Pandora Room. “This gets them comfortable in your store, so when it’s time to buy a major piece of jewelry, you at least have a shot at them.”

The industry tends to look at beads as a teen or twentysomething product, but retailers say its audience is far broader. “Pandora doesn’t seem to have a demographic,” says Smith. “We have young kids, old ladies, and everyone in between.”

PURPLE REIGNS But beads come in all shapes, sizes, and colors. Above: One of the many options from Chamilia

Pandora is probably the best-known charm line, followed by Chamilia and Trollbeads. (Relations between Pandora and Chamilia have been rocky; over the years they’ve sued each other over various issues, including trademark infringement and defamation.)

With their mix-and-match approach, all these brands have tapped into the larger consumer trend of customization. “If a woman walks into a room and someone is wearing the same thing, she gets upset,” says Lund. “The chances of a woman meeting another woman with exactly the same Pandora bracelet are pretty low. And if women walk into a room and one is wearing a Pandora bracelet, they all gather around and discuss it.”

The bad economy also proved to be good timing for the affordable charms…even if those small price tags can be deceiving. “We have women come in and spend $30 a week,” says Smith. “Over a year, they’ve spent a lot of money but don’t feel like they bought a $5,000 piece of jewelry.”

And while the product appeals to the much-talked-about—but not always visible—self-purchasing female, it also works as a gift. “Husbands love it,” notes Alan Brown of My Diamond Shoppe in Plano, Texas. “They walk in and the wife has her charms [all picked out], and the shopping is done. He’s a hero because he’s gotten what she wants.”

As for the future, retailers worry about oversaturation. Pandora can now be found in Jared, and other majors have introduced bead lines. But Lund argues that per-store sales are higher in areas with greater penetration and notes that Pandora’s customer awareness is still low. “A majority of consumers don’t know who we are,” he says. “We call ourselves the most successful unknown brand out there. Our potential is much greater.”

INNER CIRCLES With so many metals and stones to choose from, design possibilities are endless. Above: A bracelet from Chamilia

He’s certainly betting on it: In 2009, Pandora opened 70 boutiques run by local partners; 70 more are planned for this year. Lund aims to run nothing less than “the most recognizable jewelry brand in the world.” Reuters reported that last year his company logged $500 million in sales and may be going public (Lund declined to comment on the latter). “It’s exceeded our wildest dreams,” says Lund. “I set out to do a healthy little business and have some money for when I got older. I feel like I’ve won the lotto, times 10.”

Chamilia has its own expansion plans—rings and necklaces that give consumers a “different way” to wear beads. “I don’t see any slowdown in the category,” says company founder Killian Reider.“I think it’s a staple. In the future, jewelers will have their engagement ring area, cocktail ring area, and an area for beads.”

Whether charms are a basic or merely a passing fancy, everyone agrees they have become jewelers’ lifelines in a difficult time. -Bailey thinks beads got where they did by being innovative, and that they’ll remain successful if it stays that way.

“They said the same things about David Yurman—that it was a fad,” he notes. “And David Yurman’s still extremely strong. The charm bracelet won’t be this popular forever, but if they keep coming up with new designs, it will have staying power.”